In an effort to achieve both high infrared transparency and electrical conductivity, InxOy films having different oxygen atomic fractions, ranging from 0.27 to 0.6 were prepared. From AC electrical measurements it was determined that conductivity of InxOy films, having oxygen atomic fraction near 0.6, is governed by the hopping conduction mechanism via energy states located in the band gap. Conductivity of InxOy films having non-stoichiometric compositions was found to be governed by the free band conduction mechanism. The conduction activation energy was decreased from about 0.47 eV to about 0.02 eV as the deviation of the oxygen atomic fraction from the stoichiometric value of 0.6 was increased. The dielectric function of the films was determined by applying the Drude–Lorentz model to ellipsometric measurements in the infrared and visible wavelengths. In the visible range, the major source for optical transmission loss is interband absorption, which was modeled by the Lorentz model. In the infrared range, optical absorption was measured and attributed to the presence of free charge carriers according to the Drude model. Fitting the model to the optical measurements required a correction factor, which was correlated with the films polarizability. In order to determine the optimal tradeoff between optical transparency in the infrared and electrical conductivity, which were found to be affected mainly by the oxygen concentration in the films, a figure of merit parameter was established. It was found that by introducing non-stoichiometry in the form of oxygen deficiency, the electrical conductivity was improved by as much as two orders of magnitude while the infrared transparency was decreased by no more than 30% with respect to stoichiometric In2O3 films.